Full Sail Partners Blog | Lisa Ahearn

Mergers and acquisitions have become commonplace in the professional services industry.  When firms join forces, they are typically hoping that 1 + 1 = more than 2!  By leveraging the best that each firm has to offer in terms of talent, diverse market penetration, client/contact lists, and means and methods of success, goals can include forming a stronger company that continues to successfully execute projects, attracting top talent, and growing in revenue and profitability.   

During the merger/acquisition process there are of course many things to consider.  Change management around topics such as corporate cultures and people management, branding, client loyalty, processes and procedures, and systems must be included in those considerations! 

Full Sail has helped many firms going through mergers and acquisitions with the integration of their ERP systems, when at least one company is using Deltek Vision or Vantagepoint.  While an exhaustive list of lessons learned would be too long for anyone to compile or read, we’d like to share some of the top things we recommend. 

Get the Right People at the Table 

Make sure that management/decision makers, system administrators/power users, and data consumers from all firms involved are represented in the discussions around data integration.  Sometimes the best intentions of management have unintended consequences for the day-to-day users, and sometimes the day-to-day users are not yet aware of intended changes in policies and procedures.  In the cases of acquisition to a greater extent, and especially in the beginning, some of the users may feel too intimidated to speak up and indicate that the consequences of decisions would have a negative impact on their day-to-day activities or ability to report on crucial data.  Getting a thorough understanding of how each firm uses their system(s) and data to achieve its goals, and what they would like to be able to do better, are important when making decisions about how to set up the new single system.  Invite CRM, finance, project management, and HR representatives to participate.  In our project-based environments it is important that PM’s have input along with the marketing and accounting/finance teams! 

Consider involving a third party such as Full Sail Partners, to help facilitate the conversations.  There are many aspects of system setup that can easily be overlooked or may not have been used before.  A neutral third party can also contribute ideas and best practices that can help combine currently-disparate methods into workable solutions to move forward.  Additionally, having someone to help the firms involved stay on task and accountable for timelines can prove to be valuable during a time when there are many conflicting priorities.  Full Sail consultants in finance and CRM can help explain system functionality.  Full Sail’s human resources consultant can help identify the most appropriate HR policies from each firm.  And a data migration specialist can help streamline gathering data from one system (Deltek or not!) and get it set up for, and then imported into, Deltek Vision / Vantagepoint. 

Decide how the new Company will be Added 

There are several options for adding a new company to Vision / Vantagepoint.  Many firms will use the multicompany function.  Some companies will enable or expand an organization structure.  Others will incorporate the additional company’s data directly with their own.  It is critical to think through how you will need/want to report on and analyze financial aspects of the companies, and configure the system to meet those goals. 

Another aspect to consider is the currencies in which the companies operate.  Vision / Vantagepoint can be configured to handle transactions for multicurrency operations. 

Examine and Align the Data 

Data migration specialists work with firms to identify and ready the data.  In order to make sure all the necessary data is brought into the new single system, it is important to identify all the systems the merging or acquired firm uses currently to hold data.  Is there one ERP?  Is there an accounting system, a marketing system, an HRIS system, and some spreadsheets?  Deciding which data will be incorporated into the new system is an important first step and is also necessary to scope/estimate the migration effort.  This will start to lay a clear groundwork for the migration process. 
 
The firms will also need to decide how much data will be brought into the combined system.  Do you plan to bring everything from day one of business, a certain number of years, or only GL balances?  If not bringing in historical data, where will that data be kept and how will it be accessed for operational needs or potential audits?  Address how redundant data will be handled.  If both companies have some of the same clients and contacts, how will you identify what should be kept from each?   

Assigning “data owners” is recommended so the data migration specialist knows who to ask when questions arise.  These data owners would also be responsible for participating in meetings about the data, developing a comprehensive test plan for users, and then reviewing and testing the migrated data. 
 
After identifying the higher-level parameters, consideration must be given to the details.  Decide on code formats and systems for numbering records such as the chart of accounts, employees, firms, and projects.  Alignment is needed for the chart of accounts, so mapping the new company’s accounts to the existing “like” accounts and identifying any new accounts that are needed is often one of the first steps.  Project numbering and work breakdown structure (WBS) will need to be carefully reviewed.   Keep in mind that not all systems have the same type of WBS, and even if both companies are using Vision / Vantagepoint they may be using the WBS differently.  Labor categories, labor codes, billing terms, accounting periods, and even the overhead projects all need to be given consideration.  For example, if the new company’s existing system does not use an equivalent to labor categories, and the Vantagepoint environment requires them, how will that be handled?  Will overhead time be loaded, and do the companies have the same overhead projects, will more need to be created, or will some need to be combined?    

Staff Training and Communications 

Staff at both companies will need training and communication about the changes.  Training and communication should not be an afterthought!  Employ sound change management throughout the process.  Those on the M&A team may forget that the rest of the staff don’t know the decisions being made.  The employees at both firms may be nervous or anxious about the changes.  Giving employees the information they are allowed to know in a clear, concise, and timely manner can help. Offer the info in easy-to-consume bits, but don’t overwhelm them with too many separate communications. Even something as simple as a list of who can be contacted for questions in specific areas will be helpful!   

Training is critical, even if both firms use the same system.  There are as many ways to use Vision / Vantagepoint as there are firms that use it!  Be sure to cover new processes, nuances in the database such as user-defined items, and add-on products.  Prepare a training plan and send the training session invites well in advance.  Have a leader from each firm in the sessions (in case any employees start asking the trainer questions on decisions), in addition to your top-notch trainer(s) or Full Sail consultant and someone in an equivalent training-type role from the other firm that can help “translate” questions that may be asked in company-specific lingo.  Record the training sessions so those that cannot attend can catch up and those that would like to re-watch can do so.  Consider incorporating “cheat sheets” and infographics so people can have a handy reference the first few times they go through a new process.  Make sure back-office staff are comfortable doing their jobs in the new system.   

Company growth is both exciting and challenging.  Involve the correct people, carefully consider processes, procedures, and data, and communicate with your staff.  Reach out to the Full Sail team for guidance.  We love to see our clients succeed! 

In a perfect world, professional services firms could invoice their clients for every charge to every project, and the clients would pay every invoice. However, in reality, nearly all professional services firms have write-offs. Write-offs can occur when your firm and your client agree that they don’t have to pay an invoice, when the client is unable to or refuses to pay an invoice, or when your firm is unable to bill all project charges to the client.

While writing-off charges is necessary sometimes, the good news is that each of these types of write-offs can be easily handled in Deltek Vantagepoint. Since write-offs impact the firm’s financial statements, it is crucial to have clear guidelines as to the accounting period in which they should be created/posted. In this blog, let’s talk a little bit about how to handle write-offs the “right” way to make the process as painless as possible.

Firm and Client Agree to a Reduction in an Invoice Amount

Did you accidentally invoice the client too much?  Did you send an invoice for a change order before it was fully approved? Or did the client argue about a portion of the invoice, and you agreed to a reduction in the invoice amount? 

When the client does not require a revised invoice, you may choose to do an invoice adjustment through the transaction center. It is recommended to use the original invoice number and date, and the WBS2/3 level from the original invoice. Doing so will result in the adjustment being applied to the original invoice, making receipt more efficient. One thing to consider when using this method is that if you keep invoices on file, the PDF invoice stored on the project will not show the adjustment. If the PDF invoice was later needed, it could be confusing that the total no longer matches the invoice amount that shows in the system.

If the client requires a revised invoice, or if you prefer to make sure the invoice on file matches the amount the system shows as billed, you may instead choose to void and reissue the invoice through Interactive Billing in Deltek Vantagepoint. Voiding an invoice reinstates the charges that were included with the invoice (which allows you the option to hold or write-off charges) and you would issue an invoice for the new amount. When voiding an invoice, it is best to post the void before running the revised one.

It is important to note that voiding an invoice will affect the financial statements, so be sure to void in a current, open accounting period. Another consideration with issuing a revised invoice is what invoice date to use. If it is agreed that the payment terms can start on the date of the original invoice, you can change the invoice date in the billing session options.

A Client is Unable to or Refuses to Pay an Invoice

Did your client go out of business? Did a portion of your work fail to meet expectations? And, did it result in the client refusing to pay?

Many professional services firms track an Allowance for Bad Debts against Accounts Receivable. When a client cannot or will not pay an invoice, it is likely that you will want to put the write-off against the allowance. The most efficient way to do this is to process a zero-dollar cash receipt. Select the invoice as though you are paying it, then enter an additional line in the cash receipt and select either the bad debt contra-asset or expense account.

Many firms use an indirect account for a bad debt expense. But, if your firm prefers bad debt expense to be a direct expense, you could set up a project as a regular charge type and a direct expense account to be used exclusively for recording bad debt.

If your firm reports on a cash basis, and you do not want to show any revenue or expense, Deltek Vantagepoint can accommodate that as well. In AR Mapping accounts, set up your Allowance for Bad Debts as an invoicing account (leave all other fields blank unless you also want a separate AR column). Then when you need to write off an AR invoice, process a negative invoice transaction using the original invoice number, WBS level(s), invoice section(s), and the Allowance for Bad Debts account.

If you do not have a bad debt allowance, you can void the invoice as explained previously and write off the transactions (explained in the next section). You could also choose to do a credit memo. The credit memo function reverses the invoice but does not reinstate the charges to Interactive Billing.

The Firm is Unable to Bill All Project Charges to the Client

There are several reasons you may not be able to bill all the charges on a project to the client including inefficiencies during work performance, going over budget, training new staff, and resource turnover. GAAP guidelines indicate that potential losses are to be recognized as soon as known. When it is known that charges cannot be billed to the client, use the write-off function in Interactive Billing.

This function will cause the items to be excluded from invoicing, thereby not recording revenue. If your professional services firm uses revenue generation, then to exclude write-offs, make sure the formula is set up accordingly. Using the write-off function for charges will not remove the charges from project reporting, except in cases where you choose to exclude charges to be written off such as on the Unbilled Summary report.

On reports where you can select to show the billing status of charges, items that have been marked for write-off have a status of W, and items that have been written-off have a status of X. If tracking/reporting of write-offs is desired, you could choose to use the project detail report. Then on the options tab, only include charges with the X or W status.

Visibility Around Write-Off Amounts

Using Deltek Vantagepoint, there is visibility around write-offs. As mentioned, to see the specific items written off, you can use a report such as a project detail and include only items with the X or W status. Since typically no revenue is recognized for written-off items, there are other areas that you can see write-offs and their impact as well:

• As negative profit on the Project Earnings and Office Earnings reports when run at cost
• As a negative variance on the Project Earnings and Office Earnings reports when run at billing
• In Project Review at cost and billing in the profit/variance box

Use Deltek Vantagepoint to Manage Write-Offs

As discussed, there are several reasons that professional services firms experience write-offs. When write-offs are necessary, know that Deltek Vantagepoint can be set up and used to process them the “right” way, while also providing visibility so that your firm has a handle on its financial statements. If your professional services firm needs assistance in this area, don’t hesitate to contact us for more details.